Honolulu Special Funds

by Tom Yamachika, President, Tax Foundation Hawaii

This week we will be discussing some of the proposals on the ballot in Honolulu that have been put forward by the Honolulu Charter Commission.  (If you are in another county, don’t click the Close button just yet, because this issue may be coming to your island soon.).  

This year, the Charter Commission has advanced 20 proposals to the November ballot.  Of these, six, or 30%, concern special funds.  Special funds are where your tax money goes outside of the normal budgeting and appropriation process.

The Charter now provides for five special funds in sections 9-204 to 9-206:  the Clean Water and Natural Lands Fund, the Affordable Housing Fund, the Climate Resiliency Fund, the Grants in Aid Fund, and the Honolulu Zoo Fund.  Each of the funds gets funding from an earmark on the real property tax, 0.5% of tax collections for each fund.  (The Grants in Aid Fund gets 0.5% off all general fund collections, which is a slightly different number.)  One of the charter proposals proposes to add a Food Security Fund, which would similarly be funded by a 0.5% earmark on the real property tax.

Other charter proposals seek to expand the uses of some of the funds.  Those proposals probably mean that those funds either are hoarding too much money now.  If not, we can probably look forward to lawmakers saying that the funds contain too little and that more tax money is needed for them.

We have previously spoken out about special funds, especially those in state government where we have around 2,000 of them.  Agencies that can spend money from special funds tend to spend them with little or no legislative oversight, and it becomes harder for the legislature and the public to keep track of the money the more special funds there are.  If you think it’s tough to balance a half dozen bank accounts, try 2,000 and see if your head doesn’t spin!  Furthermore, the earmark on tax revenues basically removes those revenues from any budgetary control.  If, for example, we had major damage caused by torrential rains, or a hurricane, or wildfires, could we use money in the Honolulu Zoo Fund to repair the damage?  Not unless the damage was to the zoo.  Not even the Mayor and City Council could do anything about it, because the special fund is in the charter and thus ranks above the Mayor and City Council.

Call me an old fogey, but I want budgeting decisions in the city in which I live to be made by elected officials.  Not bureaucrats who aren’t answerable to the people, not by artificial intelligence, and certainly not by voters picking some number out of the air and making the substantial dollar amount associated with that number avoid the checks and balances associated with our budgetary processes.

That way, if unforeseen problems or needs arise, then people are there to respond to the situation, people who are presumably concerned with the welfare of their constituents because their job depends on said constituents.

In short, if we don’t trust those fools in the City Council to make wise budget decisions, the answer isn’t to rewrite the budget ourselves using charter amendments.  We need to replace the fools with new ones.  That’s what our elections are supposed to be for.